1. Field of Invention
The inventions presented herein relate to methods and systems for conducting reliable transactions in an electronic commerce (e-commerce) environment. More specifically, the inventions relate to methods and systems providing a performance guaranty in a transaction.
2. Discussion of Related Art
The rapid growth in the Internet technologies and electronics has presented us with new ways for us to conduct transactions with one another. Goods are now offered for sale over the Internet. Interested purchasers can view those goods through a variety of interfaces installed on various types of electronic devices. Placing an order may be a matter of a click. An advertisement for sale of a product or a service may be posted at anytime from anywhere. So is a purchase order. All is done without having to go through the conventional process of interfacing with a human, directly or even indirectly.
E-commerce transactions have become quite efficient, but not without a price. Fraudulent transactions may occur more easily in an e-commerce environment. Without the advantages that a conventional transaction interface may have (e.g., take possession of the goods to examine the quality, validate a credit card or examine a check before a transaction occurs), a bad faith party may easily take advantage of the easy-to-use electronic links to commit fraud in the cyber space. For example, a seller may post an item for sale on one of the many auction sites. After receiving payment from a successful bidder, the seller may fail to deliver the item purchased at auction. Likewise, a buyer may make no payment when due after an ordered product has been shipped by the seller and received by the buyer.
Various attempts have been made to find solutions for these new transactional problems. One approach involves the use of “escrow”. The concept of escrow is to use the services of a trusted third party to ensure a reliable transaction. Parties to a transaction deliver their performance to the trusted third party who then delivers to each party what they should receive. For example, an auction item seller may deliver the item to the trusted third party and the buyer may send the payment to the trusted third party. The trusted third party then sends the payment to the seller and the item to the buyer. If either party fails to perform, the trusted third party will not complete the transaction. One disadvantage of this solution is that it introduces a delay into the transaction.
Another solution is to introduce a collateral in the form of a performance bond. A party, e.g., a seller, who intends to be engaged in electronic transactions may use his credit card as a collateral at a third party, e.g., a performance bond service provider. The performance bond service provider is pre-authorized to charge the seller's credit card for a certain amount called, for example, a penal sum. The service provider holds this pre-authorized penal sum as a security. Under this security, one single blanket coverage is provided, up front, to cover all transactions involving the seller up to the panel sum. The seller's performance in transactions under the coverage is guaranteed. When the seller defaults, the performance bond service provider charges, under the pre-authorization, the seller's credit card to remedy the default.